Are Car Title Loans a Smart Move? – Complete Guide

The title of this blog post might seem like a misnomer. After all, you’re not borrowing the title for your car, and in most cases, they can’t be repossessed or seized by lenders. So why do we call them “car title loans?”

Well, it’s because these types of loans are secured by both the vehicle and its ownership documents (the car title). If you default on the loan terms, such as making payments on time, then your lender will take possession of your vehicle and sell it to recoup their losses.

Car Title Loans: 8 Things to Know Before Getting One

1. To Get a Car Title Loan, You Will Need To Own It or Have Equity in It

To qualify for a car title loan, you will need to own the vehicle outright or have a high enough equity stake in it. This is because the loan is secured by the car and its title. So if you don’t meet these requirements, you’ll likely need to look elsewhere for financing.

They want to see how much equity is in your vehicle: Most lenders will only approve borrowers who have at least 50% of their vehicles’ value in equity. So if your car’s worth $5,000 but has only $1,500 in equity, then it probably won’t be considered for a car title loan.

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2. The Interest Rates are Typically High

Car title loans have notoriously high-interest rates. So be sure to read the fine print before signing any paperwork and know precisely how much you’ll be paying in interest over the life of the loan

3. There’s No Pre-Approval Process

Unlike other types of loans where you might go through a pre-approval process, car title loans are pretty much an “as-is” deal. You apply for the loan; then, once you meet its terms, they’ll give you the money and hold onto your car until it is paid back in full.

4. If You Fail To Repay the Car Title Loan, You Can Lose Your Vehicle

If you fail to make timely payments on your car title loan, then lenders can repossess and sell your vehicle to recoup their losses. Of course, the lender will need to notify you of this action beforehand so that it doesn’t lead to any unnecessary misunderstandings.

5. Don’t Use It for an Emergency

Car title loans should only be used in times of extreme need when cash is urgently needed for things like medical bills or utility bills. That way, even if you lose your vehicle to repossession, it’s not something that can ruin your credit score or get in the way of other financial goals, such as saving up for college tuition.

6. Your Credit Score Plays No Role in Getting a Car Title Loan

Even people with bad credit get approved for car title loans because lenders don’t care about your credit score. You can get car title loans without proof of income. They’re far more interested in what kind of equity stake you own, why you need the money, and whether or not you can pay it back – all things that they can tell simply by speaking to you.

A car title loan is a quick way to get cash. Car title loans are often the best way to get cash in a hurry. Many people don’t realize that they can borrow against their existing equity or even use their vehicle as collateral for future purchases. Car title loans are not typically used as long-term financing options.

7. The Lending Agency Can Repossess Your Car If You Fail To Pay the Loan in Full

Just like with regular loans, failing to repay your car title loan in full can get you into serious trouble. This is why it’s essential to read over any paperwork you are given before signing on the dotted line. If you cannot pay the loan back in full, the lending agency can repossess your car and resell it to make up for the lost money.

8. The Lenders Appraise Your Car to Get the Loan Value

When applying for a car title loan, lenders will look at your vehicle and determine its value. They’ll then only lend you the amount needed to cover the cost of the vehicle itself plus any interest and fees involved.


Car title loans can be a great way to get cash in a hurry, but it’s essential to understand the terms and conditions before signing up. Make sure you know how much interest you’ll be paying, what will happen if you fail to repay the loan, and what your repayment options are.

And above all, try not to use a car title loan as a long-term financing option – these loans should only be used in emergencies.

So there you have it. Eight things you need to know about car title loans. By understanding the basics, you can make an informed decision about whether or not this type of loan is right for you.

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